Bar News - March 22, 2017
Vintage Value: Provenance Research in the Antique Car Market
By: Jeff Murray
NH Attorney Investigates ‘Passion Investments’
The market for high-end vintage collector cars has expanded dramatically over the past 30 to 40 years. What was once the purview of only a few well-heeled vintage car hobbyists has now morphed into a very valuable alternative investment market.
According to the Knight Frank Classic Cars Investment Index, high-end vintage cars were the top-performing asset in a 10-asset class that included art, stamps, watches, jewelry, coins, wine and antique furniture. For the past 10 consecutive years, vintage cars have been the top-performing asset. The thrill of owning a beautiful, historic vehicle that you can use and enjoy, and that will likely increase in value, is an attractive proposition.
The increase in market venues, such as televised auctions, the internet and the number of reputable dealers, has attracted buyers from all over the world. Vintage cars have become such a popular alternative investment that there are now indexes such as the HAGI Index, www.historicautogroup.com, that track sales of high-end vintage Ferraris and Porsches and other classic cars, much like the Dow Jones tracks the stock market. The highest price achieved by a vintage car at auction was $38 million in 2014 for a Ferrari. Rumors abound that other cars have sold by private treaty at even higher prices.
The ever-increasing popularity of the vintage car as an investment, coupled with the ease of access to markets by relative newcomers, only heightens the need for due diligence and caution. These cars are considered passion investments. The car you wanted as a child is now, years later, within your reach. Emotion, however, can cloud sound judgment.
The vast majority of vintage cars are authentic and exactly what they are advertised to be. The old adage is true, however. Whenever lots of money is chasing after too few assets, two things occur: inflation and the potential for fraud. With regard to vintage cars, due diligence and provenance research can prove authenticity, originality and establish clear title. In the business of vintage car research, provenance means an unbroken, proven ownership chain. A high-quality car with a documented, unbroken chain of ownership and significant history will quickly surpass the value of a similar car that features more questions than answers.
Provenance alone does not prove authenticity. It is just one of three parts necessary for authentication. The other two are expert evidence and scientific analysis. Frequently, vintage vehicles lack a clear title, and many prove to have inaccurate provenance, and authenticity issues.
Consider the following case studies:
Title Research: You Can’t Pass Title to Something You Never Owned
Hans Prym, locally known as the “Zipper King,” was the owner of a company in Germany that manufactured and supplied buttons, zippers and other items to Hitler’s armies. The family estate was located in Stolberg, Germany, on the border between Germany and Belgium. In 1935, Prym ordered and took delivery of a beautiful Mercedes 500K Special Roadster, a very rare and significant vehicle. When the Allies invaded Germany in 1945, Prym was incarcerated and his Mercedes disappeared. The Prym family has always maintained their car was stolen.
The car’s history was obscure up until about 1970, when it appeared in the US. From that point on, the car passed through a chain of owners culminating with a Dutch classic car collector. He paid nearly $3.8 million for it at an auction in Monterey, California, in 2011. The car next appeared for display at a 2012 classic car show in Germany. The Mercedes was quickly impounded under court order. A German court ruled that the heirs of Hans Prym had a legitimate claim to their grandfather’s 500K Special Roadster stolen some 67 years earlier in 1945. The Prym family took back their car.
Stolen cars can present unique research problems. Interpol’s website and www.stolencars.eu have many good links to determine if a car was ever listed as stolen in Europe. Surprisingly, in the US, it is more difficult to determine if a car was stolen or not. Unlike Interpol, the FBI has yet to make its list of stolen cars available to the public. You have to be a sworn member of law enforcement to gain access to that database. Instead, my research starts with the free National Insurance Crime Bureau website. This site may be able to identify a stolen car, but only if it was insured at the time of theft.
In researching the chain of ownership, whenever I find a car here in the United States or abroad that has been inherited, I always research probate records. It is not uncommon for a seller to inherit a car then quickly present it for sale and skip the entire probate process.
Provenance Research: “It’s The Sizzle that Sells, Not the Steak”
Sources vary as to who coined that phrase but it sometimes applies to the sale of vintage cars. Sales descriptions of these cars always involve exclusivity. A descriptor that distances this car from all others. For example: “Once owned by (insert name of any famous actress from the 50s-60s, preferably deceased)”, or “the only remaining example of three built” or “the car on the Ferrari stand at the 1967 Turin Auto Salon.” Some puffery is expected in these descriptions, but if it goes to the very basis of the sales agreement, accuracy matters.
A good story sells the car. Interesting statements may enhance the value and desirability of the car and drive up the price. For example, I researched a 1960s Maserati claimed to have been owned by a famous American actress. I found her business manager, now well into his 90s, alert and clear, who told me he personally bought all her cars and they were always used Fords and Chevys. Apparently she was not a Maserati girl.
On the other side of the equation, I found some intact, yet-to-be-cataloged photographs on glass plate (!) negatives in the musty basement of a museum in Turin, Italy. They very clearly showed my client’s Ferrari to indeed be the featured car on the Ferrari stand at the 1967 Turin Auto Salon.
Scientific Testing: The Third Step of the Authentication Process
In April 2016, the NH Bar Association sponsored a CLE on forensics, one section of which concerned the alteration of serial numbers on firearms. That same firearm serial number forensic information had direct application to altered, concealed and obliterated vehicle identification numbers.
I hired a gun serial number specialist to examine a 1947 vintage car and look for long-lost serial numbers stamped on the frame. The numbers were found, made readable and substantiated the owner’s claim that his car was indeed authentic. I have also used metallurgical testing when necessary.
The three examples above are exceptions, aberrations. The market is safe and secure and will continue to be. There are several fine vintage car collections in New Hampshire. People are building collections and divesting all the time.
We may be on the verge of a great generational transfer of wealth, as the Baby Boomers age and their collections are liquidated. An attorney who is assisting an owner in acquiring a classic car or selling one should be aware of the need for due diligence and provenance research.
The path from hobby to business is well-trodden. Start with an interest, add some passion, retire from the “real” job and work ridiculous hours. Since the 1960s, I have accumulated a personal library of resources that exceeds 4,000 books, 3,000 business contacts and thousands of photographs. Starting in the 1970s, I took photos at every vintage car show I attended, including detailed photos of VIN numbers and other identifiers. I have thousands of color and black and white pictures all cataloged for reference.
The work is not easy. It takes time, resources, and patience. It is also not for the faint of heart, as there can be surprises. You have to be steeped in it and the research requires a certain gestalt to complete. The results are fascinating to me.
Jeff Murray, an inactive member of the New Hampshire Bar Association, is the owner of Vintage Car Research in Amherst, NH, a company that conducts due diligence research. Find VCR online at www.vintagecarresearch.com.